Difference between By-Product and Co-Product

05 Jul 2011 5:50 am || 1

Difference between By-Product and Co-Product

Stechies

By-Product vs Co-Product in SAP BOM

Main difference between By-product and Co-product

In the case of Co-product costs are settled with an apportionment structure whereas In the case of By-product the price of this by-product is credited to the order or the material stock account of the lead material being manufactured.

Co-product is produced with ur main product and u have to define apportionment structure in material master. when both products are equally important then they can be a co-product.

By product is like a waste for that u have to not defined any apportionment structure in material master it's value is less as compare to main product
In BOM u can define both of them by negative sign

In co-product, u have to put one extra indicator which shows co-product
you can do this by selecting the material in bom then go to detail and tick-mark the box which shows co-product

A co-product is produced along with with the main product and carries equal importance as the main product. Whereas a by-product is not a planned product and is produced after carrying out the process eg. ethanol is a byproduct of a sugar industry. U need to define both in BOM.

Co-product must have costing value, must have a settlement rule and mandatory with the main product.
BY product has no costing and settlement rule.
bulk product....MRP run can not consider the bulk product.

How do you differentiate them in a BOM

Co-Product as well as By-product are defined as BOM Components/Items. Both of them have negative quantities. ( Not all negative quantity items fall under these categories!). When BOM is created for FERT, you can see one indicator in COMPONENT DETAILS screen for co-product. You need to define the co-products with this special indicator. But the way to differentiate in any industry is that if you are going to accept the orders for a negative product in BOM and going to plan for it then it has to be Co-Product. Because it has a cost valuation. If you are not going to plan for it and will sell in open market or discard it as per situation then it has to be by product.

Comments

11 Jul 2017 2:36 pm Sonia Barwar

Difference between Co-Product and Bi-Product with an example

If you look at a petro chemical refining industry their main input material will be "Crude oil" during refining they get "Petrol", "Diesel", "Kerosene", "Naptha" & "Water" etc...

So the whole of the production cost should not go to "Petrol" alone, as Diesel, Kerosene and "Naptha" are also sellable. Water is not sold out, but is being used internal for the operation.

In this scenario "Petrol". "Diesel", "Kerosene" and "Naptha" are defined as co-products in the material master. And the cost which needs to be distributed among them are in the ratio 30:30:20:20, so in the joint production details we select the apportionment structure, and here we define the equivalence number by entering the materials and numbers as required by us as 30:30:20:20.

Now BOM is defined for the main product "Petrol" and Diesel", "Kerosene", "Naptha" and Water are defined in -ve quantity. Here the definition of water goes as "BiProduct". Crude oil is defined as component in +ve quantity. Now during order costing/product costing/settlement considers the entire cost of production based on the crude oil cost and infrastructure cost and it splits into the ratio defined in the equivalence number.